Steps YOU can take NOW to reduce Credit Card Debt

debt free from credit cards

If you are like me, you’ve probably looked at your credit card debt at one time and wished you were free of them. But many people don’t know what the best way is to do this or where they should begin. And truly there is no best way.  Not one way will work for everyone. It all depends on your current salary, your amount of debt, how much extra you can put towards paying off your debt etc.

Since everyone is so unique, I won’t provide you with the “best way” but instead I will show you several ways to pay down credit card debt. Some of which I’ve implemented personally and so far managed to pay off over $80,000 worth of debt in two and a half years! Still we have remaining credit card balances of about $8,000 for which I’ve strategically planned to pay off by the end of 2016 and be completely 100% credit card debt free. Yeah go me! And you can do it too! 

So where does one begin?

First off if you are one of those folks who has no discipline with your credit cards the easiest way to take action right NOW is to do one of the following:

  1. cut up all your credit cards but 1 or 2
  2. can’t cut them? make them harder to use; get a baggie put in your card pour in some water and freeze it in the freezer!! new meaning to freezing your spending habits :)
  3. leave them at home in a lock box; having credit cards in your wallet allows for easy access and simply having them lying in a drawer does too, make it harder for yourself to gain access to your credit cards
  4. call up each credit card company and see what options you have; some will allow you to close the account without paying off the debt first, some will have other card plans you can utilize with lower interest rates but without some of the fluff, for example no more Airmiles collection (but believe me when a card is maxed you won’t be collecting Airmiles anyway)

Another action you can take NOW!

Surround yourself with positive “debt free” images. This is method is called visualization. Having your end goals literally within vision of the eyes will subconsciously affect the brain. Post your images on a wall, door, fridge or board. Use images that mean something to you. This could be a picture of a place you’d like to visit, or a tiny house, a beach, a piggy bank or a dollar bill. You could use one image or many images, these can be cut outs from magazines, newspapers, prints off the Internet or photos from your own collection. It doesn’t matter where the images come from or what they are of, as long as they mean becoming debt free to you! They will help to inspire and focus you on your daily journey to obtaining this end.

Remember the more places you put these images the more often each day your mind will subconsciously pick up on them and remind you. So get creative. More ideas … leave yourself a post it in your lunch, make your cell phone wallpaper a reminder, use your desktop on your computer as another subtle hint … there are many ways to accomplish this.

Now that you’ve taken some immediate action it’s time to analyze and formulate a plan. One of the first things you may wish to do is use an Online Debt Calculator. They are absolutely FREE to use and no one will be calling you and knowing what you are up to. The calculator can provide you with a clearer picture of where you are and what you could do and how long it will take to get there.

Here is a link to Credit Canada Debt Solutions‘ online calculator. In my own example of $8000 debt here is what it shows me:

a) if I continue on the road of minimum monthly payments it will take 300 months (that’s 25 years) to pay off and over $10,000 worth of interest, YIKES!

b) using a debt consolidation program I could pay off this debt in 48 months (4 years) with zero interest, sounds good but it’s their program and for me too long

c) making a fixed monthly payment of $$ we can spare of $680 it will take 13 months (just over a year) and cost me $813 in interest which is one other payment.

Personally I opted to play hard ball and pay off this debt in one year with some interest. You can choose the method that is best for you.

More steps you can take to reduce and pay off credit card debt

Pay more than your minimum

Many monthly statements now will even show you directly on them that if you continue to pay nothing but a monthly payment it will take forever … and ever. Often as long as ten, twenty and thirty years. Of course each and every day that passes you will be owing interest on every penny you owe them. Do you really want this? NO, of course not. So when you see a minimum payment of $80 give them extra, if you can’t afford extra I’m sure you can squeeze in $10 or $20 after all that’s the morning coffee’s you purchase or a pack of cigarettes or lunch out etc.

Consolidate debts into one with lower interest rates

Consider getting rid of all the cards you now carry, especially ones that are store specific since they carry the highest amount of interest rates often in the 30% range. You should try to keep only cards around 10% interest. One way you may be able to consolidate is to take out a Line of Credit, these are often at very low rates of prime +1% and with lines of credit you pay minimum payments without paying off interest on the balance remaining.

Spend less than you make & Don’t use credit cards to do this

Another simple way to paying off your debt is learning how to live within your means. Think about purchases twice and three times. Do you really need this item? Can you live without it? Why are you making this purchase?

In the beginning you can make such a list of questions and carry it in your pocket until you get used to this new way of deciding to make a purchase. Remember if you do this for 21 days you will have created a new habit for yourself and it will become much easier from there on in.

If you really need the item then of course buy it by all means but remember you are trying to use cash or ok, actually debit for most of us, since who carries cash these days.

If you want to really strict with yourself you could remove all cards from your wallet including the debit card and start carrying just enough cash for the things you will NEED that day.

Ten simple ways to spend less money:

  1. decide how many cups of coffee you will buy (cut back by 1 or more)
  2. do you buy lunch every day, make a lunch daily or every other day
  3. are there others in your area going to your place of work, how about car pooling
  4. do you eat out for dinner, then cook at home, the more often the less money you will be spending and healthier you will be eating if you cook with fresh ingredients
  5. cut back on paid entertainment: movies, golf, boating, skiing; replace them with free things like taking a walk, playing cards with friends, bicycling
  6. buy clothing from re-use shops, if you look around you will find almost new items for considerably less cost, even brand names
  7. use apps like Flipp for price comparison shopping especially on groceries and go to stores that will price match; another app called Checkout 51 will further reduce your grocery bill by paying cash back on items
  8. ladies do you dye your hair at the salon, an idea is to do it yourself or have a friend assist at a fraction of the cost
  9. couponing is another great way to save $$ not only on groceries but looking for deals on everyday items that you need to purchase
  10. buy used, rent or possibly even borrow things that you don’t use that often and don’t warrant you purchasing to have standing around for ten months each year

Pay off debt aggressively by getting a second or side job

I know this may not seem appealing to everyone since it does cut into time spent with your family and friends and even from yourself but the key to remember here is that this is NOT a lifetime thing. The plan you have made for yourself will be for X amount of time. For some of us that means a year or two or three; whatever it is there is a light at the end of the tunnel and ultimately keeping this in mind it is certainly better than being in debt and stressed out daily for the rest of your life!! Which of course is always an option.

Getting a second job is fairly self explanatory but side jobs, hmm what could you do? Take a look at your skills. Do you knit, then perhaps you might take on some knitting jobs from friends; are you creative in some way, setting up an Etsy shop to sell your creations may be another way. You could do some babysitting or accounting or personal taxes. These are all ideas and all of them could work for you temporarily and who knows you may just find something you love doing and it grows into a permanent full time job that you created for yourself just by stumbling upon it.

Paying off the highest interest rate cards first

This is something else you want to do. Get rid of those high interest rate cards first, either by consolidating them into a lower interest loan or by paying them out right.

Have you ever heard of the “Rule of 72”? Well not that you need all the details of it but it basically boils down to this: 72 / interest rate = # of years for your investment/ debt to double.

So using this rule if you have money set aside in a savings account earning 2% interest, those savings will take 36 years to double BUT having a debt with 30% interest rate (like retail store cards) will only take 2.4 years to DOUBLE !!!

So while you are in debt, instead of having savings put away concentrate your efforts into paying off those debts first, especially the highest interest rates as they will double much faster. Then by all means start a savings. An emergency fund is still a good idea even during your debt paying phase, as one never knows what might happen tomorrow.

Pay bills each time you get paid

Ever notice that those credit card statements only come in every month? That’s because they really don’t what you to be paying them off anyway … ok that’s not the true reason but they sure don’t want you to pay them off either. They prefer if you are in their debt for a very long time or even forever. Since this is how they are making their money from you. They don’t make money if you pay them off each time you receive a statement in the mail.

So instead of paying them on the due date monthly get into the habit of paying them when you get paid. If you are paid weekly then pay them weekly too. Yes it can be smaller amounts, as long as it adds to up to at least your minimum payment and ultimately more than that. Paying them each time you get paid also reduces the amount of interest you will have to pay at the end of the month because interest is calculated daily on the balance you owe. So every little bit you pay down before the end of the month will save you on interest.

Speak with a Credit Counselor

There is no shame in asking for help. I know that many of us may go through a period where we think, “how stupid was I to do xyz and get myself into this mess” but really the only way to learn is to get some expert advice. Now you are probably thinking oh no this will cost me more money and I’m broke already so that’s not even an option for me. That’s not true. You can get credit counselling FOR FREE !! If you Google non-profit credit counselling in your area I am positive that you will find a few counselors offering this service. All it will take is a few moments to relieve you of a lifetime of stress and anxiety and debt!

Snowball Plan

No I’m not talking about the white stuff outside my door. I am speaking of starting a debt “snowball plan”. This method utilizes smallest balances to be paid off first instead of using highest interest rates first. Why use this method? For some folks it is the best way to get things rolling and gaining in momentum like a snowball effect rolling down the hill and gathering more snow. Whatever it takes and whichever method works for you is the one I suggest you take. You may even wish to start by using one method first and then switching to the other later on as you pay off some of your debts. Ultimately whichever way you go you will be thankful you did. For further information on this subject you may wish to read the article on Living Debt Free in Toronto blog.

Final Thoughts

My blog at covers articles on health & wellness, minimalism, becoming debt free and happy and doing what matters most to me and my family. With regards to this, although this article’s intent is specifically to provide you with steps to reduce your credit card debt; I also believe it encroaches all of these other areas.

Becoming debt free reduces anxiety and depression and thereby it reflects upon your health and well-being. Eating right and being active provides you with the energy you need to get to your end goals and to keep your moods stabilized while going through the process.

Being a minimalist and getting rid of your excess things also plays an important role. Not only can you sell the things you don’t need to create more “spare cash” to pay off your debts or purchase things you really need but it also let’s you look inside yourself and see whether the things you’ve been buying on credit are really that important to you. Do they fill the void? If not then perhaps de-cluttering instead and making yourself a budget to live life within your means will be your answer to lifting this grand weight on your shoulders.

Just remember that each small step you make, starting today, right NOW, will get you one step closer to your end goal. YES, it is absolutely doable. There are many of us in just the same boat as you are now and we have done it …. we are doing it. So can YOU!